Catalonia passes a law to limit rental prices that comes from a tightrope
Catalonia has today become the first autonomous community to legislate to limit residential rental prices on the free market. The rule, presented in the summer by the Sindicat de Llogaters (tenant union), ERC, the Comuns and the CUP, has been approved with the favorable vote of the three parliamentary groups together with JxCat (except for four deputies of PDeCat), but it was born directly on the tightrope after the Consell de Garanties Estatutàries (CGE) has declared the unconstitutionality of “some” of its points. The employer and different associations that bring together funds, large holders and real estate agents await its invalidity, either through the Supreme Court (TS) or the Constitutional Court (TC).
The bulk of the text, which the PSC, Cs and PP oppose –the popular have announced that they will take the law to the TC–, is summarized in two fundamental points. On the one hand, the rental price will not be able to increase compared to the previous contract. On the other hand, rents will have to be close to the maximum values established by the Generalitat’s price index in each area, forcing rents to reduce that exceed the average cost. To this day, the autonomies do not have powers to be able to limit the rents.
Catalonia passes a law to limit rental prices that comes from a tightrope | Economy | Five days
The regulation of the lease in the event that the rule goes ahead will take place in 60 municipalities in Catalonia with more than 20,000 inhabitants, mainly in the metropolitan area of Barcelona, one of the most stressed areas in the country. In addition to the city of Barcelona itself, the other three provincial capitals will also enter into the rule.
The CGE considers that some of the points included in the text are not valid. Thus, remember, in addition to the fact that the owners have autonomy to set the rents in the free market, the communities do not have the powers to impose binding rates.
The employers’ association Foment del Treball, investment funds and various associations of promoters, property agents and holders, such as the associations of real estate agents of Catalonia or the Association of owners of rental homes (Asval), argue for their part that the law “will sink in the medium term” the rental market and will have “counterproductive” effects rather than benefits, creating an even “black market”. From Asval they also believe that it should be the Administration that provides a housing solution and establishes a system of aid to the most vulnerable tenants instead of approving “a populist measure that will not solve anything and will generate effects contrary to the desired one.”
However, recalls the spokesman for the Llogaters Union, Jaime Palomera, the law, protected by about 4,000 social, economic and cultural organizations, arises in a context of housing emergency in which rents have increased 30 times more than salaries in the last five years. “Families allocate more than 45% of their income to pay rent.”
The truth is that, taking into account the figures of the rental price reference index prepared by the Ministry of Urban Agenda (Mitma), with data reaching up to 2018, the rents in municipalities such as Barcelona, Terrassa, Rubí, Castelldefels or Sabadell are have increased by about 20% since 2015.
Before its approval, the standard was updated to the amendments submitted by JxCat. Thus, it will not be applied to small owners with an income of less than 2.5 times the Sufficiency Income Indicator (IRSC), about 2,000 euros including rent. In addition, the rental price could be increased if the owner had carried out rehabilitation works to improve the property.
The final evolution of the Catalan price regulation will set the course for the limitation of income at the national level in a context of market tension aggravated by the coronavirus crisis. According to Eurostat data, Spaniards spend an average of close to 40% of their income to pay rent, and 38% of the population suffers from overexertion. The Ministry of Transport, Mobility and Urban Agenda (Mitma) presented the reference price index for information in the summer, but left the regulation agreed in December 2019 on the air in the Government agreement between PSOE and United We Can.
One third of the offer
26.4% of permanent rental homes in Barcelona belong to owners with more than 15 properties and, in the case of owners of more than 10 homes, the percentage rises to 32.4%, according to the latest report of the Barcelona Metropolitan Housing Observatory (OHB) presented in July. The study estimates that in Barcelona there is a total park of 780,775 homes, according to the Municipal Cadastre as of January 2019, which is in the hands of 514,978 owners at an average of 1.5 homes per owner. The rental housing stock is, as of May 2020, 212,291 homes, which are in the hands of 100,020 owners, with an average of 2.1 properties per owner.
Owners who have between one and two homes represent 46.7%. By type of owners, the weight of natural persons decreased to 63%, while the other types of owners (legal persons, public administrations, religious entities, non-profit entities and others) increased to 37%. The distribution by type of holder of the large rental owners shows that, among those with more than 15, only 19% correspond to natural persons.